Synopsis : SBI Cards & Payment Services saw its stock plunge over 6% after multiple brokerages downgraded their ratings, citing rising credit costs and weakened return metrics. Analysts now hold a more cautious outlook amid challenges in profitability and asset quality.
SBI Cards Stock Drops After Q1 Results Prompt Analyst Downgrades. Shares of SBI Cards and Payment Services fell sharply on July 28, shedding 6.10% to close at Rs 834.75 on the BSE. The drop came in response to the company’s Q1FY25 earnings, which revealed a year-on-year decline in net profit and a sharp rise in credit costs, unsettling analysts and investors alike.
Several major brokerages, including Morgan Stanley, HSBC, and Bernstein, issued downgrades and revised price targets downward. Morgan Stanley moved the stock to “underweight” with a target of Rs 710, highlighting higher-than-expected stressed asset creation. Bernstein echoed similar concerns, issuing an “underperform” rating and targeting Rs 690, pointing to persistent pressure from elevated credit costs.
HSBC also cut its target price, reinforcing the growing skepticism surrounding the company's near-term performance. These downgrades suggest a broader reassessment of SBI Cards' valuation, especially in light of deteriorating asset quality and the decline in key return ratios.
In contrast, Macquarie held a more balanced stance, maintaining a “neutral” rating with a target of Rs 1,040. The firm noted that declining funding costs could cushion margins and that the stock remains attractively valued at 4.3x FY27 price-to-book. However, even Macquarie flagged the steep rise in credit costs to 9.6% — the highest in 16 quarters — as a lingering concern.
The June quarter results showed a 6.4% decline in net profit, landing at Rs 556 crore, down from Rs 594 crore a year ago. Operating costs surged 17% YoY to Rs 2,123 crore, while finance costs rose 6% to Rs 813 crore, attributed to higher receivables.
Despite a 13.8% increase in net interest income (NII), reaching Rs 1,680 crore, the company’s return on average assets (ROAA) fell to 3.4% from 4.1%, and return on average equity (ROAE) declined to 15.8% from 19.1% — signaling mounting pressure on operational efficiency and profitability.
As investors digest the mixed signals — rising NII on one hand and worsening asset metrics on the other — the overall outlook remains cautious. The trajectory of credit costs and return ratios will likely determine how the stock performs in upcoming quarters.
Disclaimer : This article is for informational purposes only and should not be construed as financial advice. Please consult a professional advisor before making investment decisions.
